Cycles Normal Bake does'nt bake indents that are not tapered
You're not doing anything wrong, what you want to do is just not possible to achieve with normal maps. If you look at it from the top, you can't see the sidewalls, therefore no normal information can be baked to the normalmap (the normal-information for the sides is infinitely small). normal maps can't represent height differences – only differences in the orientation of the faces.